Recent Price Movements and Market Performance
Reliance Power’s shares have been under pressure in recent sessions, with the stock hitting a new 52-week low of ₹30.57 on 16-Jan. The stock opened sharply lower, down 7.95%, and continued to trade near its intraday lows throughout the day. This downward momentum has persisted for two consecutive days, resulting in a cumulative loss of 4.75% over this period. The weighted average price indicates that a larger volume of shares exchanged hands closer to the day’s low, signalling selling pressure among investors.
Technically, the stock is trading below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, underscoring a bearish trend. Additionally, investor participation has waned, with delivery volumes on 14 Jan falling by 41.44% compared to the five-day average, suggesting reduced conviction among buyers. Despite this, liquidity remains adequate for trades up to ₹2.08 crore, allowing for continued market activity.
Momentum just kicked in! This Small Cap from the Auto - Trucks sector entered our list with explosive short-term signals. Catch the wave while it's still building!
- - Fresh momentum detected
- - Explosive short-term signals
- - Early wave positioning
Long-Term Returns and Relative Performance
Over the past year, Reliance Power has delivered a negative return of 22.62%, starkly contrasting with the Sensex’s positive 8.47% gain during the same period. This underperformance extends to shorter time frames as well, with the stock falling 5.98% in the past week and 8.02% over the last month, while the Sensex remained largely flat or declined marginally. Year-to-date, the stock has dropped 8.47%, significantly underperforming the benchmark’s 1.94% decline.
However, the longer-term picture is more favourable, with the stock generating impressive gains of 123.79% over three years and an extraordinary 813.75% over five years, outperforming the Sensex’s respective returns of 39.07% and 70.43%. This suggests that while recent performance has been weak, the company has delivered substantial value over an extended horizon.
Fundamental Strengths and Positive Indicators
Reliance Power has reported encouraging financial results in recent quarters. The company posted a net profit growth of 95.43% in the quarter ending September 2025, marking its third consecutive quarter of positive earnings. Quarterly PAT surged to ₹87.32 crore, representing a remarkable 6859.7% increase compared to the previous four-quarter average. The company’s return on capital employed (ROCE) reached a half-year high of 6.49%, while its operating profit to interest coverage ratio improved to 1.56 times, indicating better operational efficiency and debt servicing capability in the short term.
Valuation metrics also appear attractive, with a ROCE of 4.8 and an enterprise value to capital employed ratio of 0.9, suggesting the stock is trading at a discount relative to its peers’ historical valuations. Despite the stock’s negative returns over the past year, profits have risen by 115.4%, and the company’s price-to-earnings-to-growth (PEG) ratio stands at a low 0.4, signalling potential undervaluation based on earnings growth prospects.
Challenges and Reasons for the Decline
Despite these positives, several fundamental weaknesses weigh heavily on investor sentiment. The company’s long-term operating profit growth has been negative, with a compound annual growth rate (CAGR) of -7.14% over the last five years. This indicates persistent challenges in sustaining profitability. Furthermore, Reliance Power’s debt burden remains a significant concern, with a high debt-to-EBITDA ratio of 9.83 times, reflecting limited ability to service its obligations comfortably.
Return on equity (ROE) has been low, averaging just 0.49%, which points to poor profitability relative to shareholders’ funds. This weak financial performance is likely a key factor behind the subdued interest from domestic mutual funds, which hold a mere 0.96% stake in the company. Given their capacity for thorough research, this small holding may indicate a lack of confidence in the company’s prospects or valuation at current levels.
Moreover, the stock’s recent underperformance relative to the broader market and sector peers has further dampened investor enthusiasm. The combination of technical weakness, falling investor participation, and fundamental concerns has culminated in the stock’s sharp decline on 16-Jan.
Holding Reliance Power from Power? See if there's a smarter choice! SwitchER compares it with peers and suggests superior options across market caps and sectors!
- - Peer comparison ready
- - Superior options identified
- - Cross market-cap analysis
Conclusion: A Stock Under Pressure Despite Earnings Growth
Reliance Power Ltd’s share price decline on 16-Jan reflects a complex interplay of factors. While the company has demonstrated strong profit growth in recent quarters and trades at an attractive valuation relative to peers, persistent long-term operating profit declines, high leverage, and low return on equity continue to undermine investor confidence. The stock’s technical weakness, including trading below all major moving averages and falling investor participation, compounds the negative sentiment.
Investors should weigh the company’s recent earnings improvements against its structural challenges and cautious market positioning. The stock’s underperformance relative to the Sensex and sector peers over the past year highlights the risks involved, despite the potential for recovery suggested by its valuation metrics and profit growth trajectory.
Get 2 full years of MojoOne Premium for only Rs. 12,999. Subscribe for 1 year and we'll add another year FREE. Offer valid for a limited time. Start Saving Now →
